How the Clean Power Plan is a Game-Changer for Clean Energy

Fentonwindpark1

Cross posted from Sierra Club’s Compass Blog.

Liz Perera and Mary Anne Hitt

(Photo: “Fentonwindpark1” by Windtech at en.wikipedia. Licensed under CC BY 3.0 via Commons)

**Note:** This blog post is part of a series geared toward discussing the wide ranging impacts of the President’s Clean Power Plan. Over the course of this week, Sierra Club experts will add to this series with posts on what’s new in this plan and its effects on coal, environmental justice, labor, policy, and international climate negotiations (coming soon). 

The final Clean Power Plan is the most significant single action any President has taken to date to tackle climate disruption. It establishes the first-ever set of national carbon limits on power plants, our biggest source of the pollution that’s throwing our climate into chaos. It’s also a game-changer for clean energy, because it creates big, important new opportunities for renewable energy and energy efficiency in every state. This post provides an overview of the clean energy elements of the Clean Power Plan.

The Clean Power Plan opens up the opportunity for every state to chart its clean energy future and rapidly expand renewable energy generation. And the Clean Power Plan is happening at just the right time, because clean energy is becoming cheaper every month and is outcompeting dirty fuels in the marketplace at a rapidly accelerating rate. Wind reached nearly five percent of U.S. electricity demand in 2014, at an average of 5.9 cents per kilowatt hour (kWh), as compared to an average 10.9 cents per kWh for coal and 7.9 cents per kWh for natural gas, and its technical resource potential has increased due to newer wind turbines designed for areas with lower wind speeds. Meanwhile, some of the latest solar projects are offering power at prices cheaper than coal or natural gas. In addition, innovative approaches to community solar, like Maryland’s community shared solar program, are popping up all over the country.

But what does the Clean Power Plan mean for the future of clean energy, and how has EPA improved its approach to renewable energy in the final version of the plan?

EPA’s draft version of the Clean Power Plan, released in June 2014, vastly underestimated the role that renewables could play in our electricity market and used outdated data for renewable energy that did not reflect the current market conditions or recent technologies. There was a broad consensus among environmental organizations like the Sierra Club and the Union of Concerned Scientists, as well as clean energy companies and renewable energy trade associations like the American Wind Energy Association and the Solar Energy Industries Association, that EPA needed to improve its methodology in order to incorporate the true power and growth of renewables.

Senator Merkley (D-OR) and eleven other senators, also sent a letter to EPA detailing how the agency could update and improve their methods for calculating clean energy potential in the Clean Power Plan. After carefully reviewing these submissions, EPA ended up making substantial changes in the final standard that are widely beneficial.

Here are four ways the Clean Power Plan has improved its approach to renewables and energy efficiency:

  1. EPA recognized that the grid and renewable potential are regional: EPA revised the plan to better account for the regional nature of the electric grid and used an improved methodology to estimate the regional technical potential of renewable energy. The agency then used that as a basis to set state targets across each region, in a manner that would align better with existing renewable standards. The end result — state carbon reduction targets that incorporate much larger projected growth in renewable energy, which reflects the rapid rise of renewables actually underway in many states.
  2. EPA used better renewables data and included distributed generation: EPA used better, more current data to evaluate renewable resource potential for calculating state carbon reduction targets, and also included distributed generation technologies (power that’s generated on the site where it’s used, like rooftop solar, and not at a distant power plant), as a measure states can use to comply with the standard. Distributed generation is on the rise, providing a significant and increasing portion of renewable energy production, and utilities are not only increasing distributed energy within their energy portfolios, but are also purchasing renewable credits from distributed energy. The final Clean Power Plan creates a framework that will encourage these good trends to grow.
  3. EPA recognized renewables can directly replace dirty energy: EPA improved the way renewable energy is calculated towards a state’s carbon reduction target by reflecting what actually happens on the grid — when new renewables are added, they displace dirty coal generation. The final plan relies much more heavily on investment in new renewables rather than natural gas and now expects gas-fired generation to increase no more than would have occurred anyway under a business-as-usual scenario — a significant reduction from the gas projections in the draft Clean Power Plan.
  4. Clean Energy Incentive Program gives renewables an early push: Under the Clean Power Plan, states are expected to submit a final plan to meet their carbon reduction target by September 2018 at the latest, and all states must begin complying with their plans in 2022. To ensure renewable energy projects built before 2022 are getting proper credit, the EPA developed the Clean Energy Incentive Program (CEIP) as an option for states, and has also proposed to incorporate the CEIP as a mandatory element of the draft federal plan for states that don’t submit a plan of their own.

Through the CEIP, states will have the opportunity to award early compliance credits (CO2 allowances or Emission Reduction Credits) to wind and solar projects. Renewable projects that start construction after a state’s compliance plan is finalized (or after September 6, 2018 for states that do not submit a compliance plan) will be eligible for credits for the energy they produce in the years 2020 and 2021. States can also grant early credits to providers of energy efficiency projects in low-income communities that reduce energy use in 2020 and 2021. For every credit a state grants to an eligible project, EPA will grant a matching credit for renewable projects. Energy efficiency projects get double matching credits. Across all states, EPA will provide up to the equivalent of 300 million tons of CO2 allowances of matching credits. The voluntary program should give states a jumpstart on their compliance strategies and help keep the momentum in renewables deployment going. This coupled with renewal of federal renewable energy incentives, the wind Production Tax Credit and the solar Investment Tax Credit, can keep our momentum on renewables growing throughout the country.

Thanks to these changes, EPA has greatly increased projections of renewable energy deployment in the final Clean Power Plan.The EPA estimates that the final rule could result in 706,000 GWh of new renewable generation by 2030 (for comparison’s sake, that’s the equivalent of 45% of the generation from coal-fired power plants in 2013), compared to the proposal’s estimates of 305,000-335,000 GWh. Under the Clean Power Plan, EPA projects renewables could account for as much as 28 percent of the nation’s overall electricity generation mix by 2030, versus approximately 22 percent in the proposed plan and 13 percent today.

Overall, the Clean Power Plan is poised to be a game changer for clean energy. Now, it’s up to each one of us to get involved with the creation of state plans, and make sure it delivers.

 

Sierra Club Clean Power Plan Blog Series

 

Image Source:

“Fentonwindpark1” by Windtech at en.wikipedia. Licensed under CC BY 3.0 via Commons

Liz Perera is the Sierra Club’s Climate Policy Director

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Mary Anne Hitt is the director of the Sierra Club Beyond Coal Campaign.

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